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Economic Integration Essay

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LITERATURE REVIEW
The Concept and Forms of integration
In everyday usage the word "integration" denotes the bringing together of parts into a whole. In the economic literature the term "economic integration" does not have such a dear-cut meaning. Some authors include social integration in the concept, others subsume different forms of international cooperation under this heading, and the argument has also been advanced that the mere existence of trade relations between independent national economics is a sign of integration. We propose to define economic integration as a process and as a state of affairs. Regarded as a process, it encompasses measures designed to abolish discrimination between economic units belonging to different national
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The difference is qualitative as well as quantitative. Whereas cooperation includes actions aimed at lessening discrimination, the process of economic integration comprises measures that entail the suppression of some forms of discrimination. For example international agreements on trade policies belong to the area of international cooperation, while the removal of trade barriers is an act of economic integration. Distinguishing between cooperation and integration, we put the main characteristics of the latter--the abolition of discrimination within an area--into clearer focus and give the concept definite meaning without unnecessarily diluting it by the inclusion of diverse actions in the field of international cooperation. Economic integration, as defined here, can take several forms that represent varying degrees of integration.
Economic integration can take many forms. According to Balasaa (1962) there are four different stages of economic
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The first is a Free Trade Area (FTA), then a Customs Union (CU), then a Common Market (CM), and finally an Economic Union. Panagariya (1998, p.2; and 2000, p.288) argue that the term PTA, whether used to stand for Preferential Trade Area, Preferential Trade Agreement or Preferential Trade Arrangement, has an advantage of being wider in that it can be used to describe FTAs, CUs and arrangements involving partial trade preferences. Preferential Trade Arrangements (PTAs) 1 usually entail lower tariff barriers among participating nations than with non-member nations. Panagariya (1998, p.2; and 2000, p.288) describe PTAs as an arrangement between two or more countries in which goods produced within the union are subject to lower trade barriers than the goods produced outside the union. The trade arrangement among the eight Muslim countries of the Developing 8 Organization is an example of a PTA. A Free Trade Agreement (FTA) 2 is a PTA in which member countries do not impose any trade barriers (zero tariffs) on goods produced within the union. However, each country keeps its own tariff barriers to trade with non-members. This is usually referred to as "trade integration". A good example is the North American Free Trade Agreement (NAFTA) formed by the United States of America (USA), Canada, and Mexico in 1993. More specifically, paragraph (8) of article (XXIV) of the GATT defines a free trade area as
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